In the business world there are two main ways to increase revenue; sell more of the products you have or find new products to sell.

In generic pharmaceuticals increasing sales is often quite challenging. The overall demand for a product remains largely constant (unless you have Flu drugs!); price is often a key driver for clients to select one supplier over another and there are regulatory barriers to differentiating your product from the rest. Aside from creating a super sales team to woo potential customers, adding more products to the portfolio is the strongest path to revenue growth.

Of course this can be done either through internal R&D or through acquiring the products from 3rd party developers. Having the right mix of new products is also key: molecules where the patent has already expired have lower legal risks, but often similarly lower profit potential; whereas targeting the next product to come off patent is a higher risk, higher reward strategy.

There are of course exceptions to the rule.

The major blockbuster products will often be a blood bath on patent expiry, with many competitors slugging it out to win market share with every decreasing prices. The true ‘pot of gold' is to find a patent pathway to help your product reach the market first and block competitors simultaneously. This strategy is hard to achieve, but by working with the right partners and advisors (along with great creative R&D!), serious profit can be reaped.

It is also often the case that certain molecules never have a generic competitor. There are a number of potential reasons for this; patent coverage, manufacturing challenges or historically low sales for example. Many major generic developers are so focused on the future, sometimes a molecule drops off the radar and never makes it back on. Looking into these older products can sometimes be very worthwhile.

Partnering with 3rd party developers via licensing or outsourcing has been a major driving force behind the explosive growth of the generic sector over the past decade. There are many variants of commercial relationship that will result in adding extra products for you to sell:

• Acquisition: purchase of a marketing authorisation (product license) from the holder
• In-licensing: acquire rights to the IP of a 3rd party for the territories of your choice
• Distribution: sell a 3rd party product (your livery can be added in certain countries)
• Co-development: acquire restricted rights to IP by sharing the development costs
• Contract development: acquire the exclusive rights to a product by financing the project
• Sponsored development: get restricted rights by contributing financially to the R&D

To determine the best type of commercial relationship, a decision on the relative balance of the following influences needs to be considered:

• Risk: - potential for product failure vs securing product rights, IP development & legal responsibility vs second to market strategy
• Control: costs in/out house vs risk (greater control = greater responsibility)
• Cost: internal resource vs contracted (opportunity cost consideration), shared cost (IP license only a % of total R&D) vs exclusivity
• Resources: availability of internal skills vs necessity to grow portfolio

The pros and cons of the types of commercial relationship are subject to the motivation and strategy behind adding products to the portfolio; finance and internal resources of course also play a major role.

In simple terms; if it's an important product to your company, seek to have as much influence and control over the development as possible (co/contract/sponsored). This is especially true if timing & IP litigation are crucial; relying upon a 3rd party could create major challenges and not a small amount of stress if things don't quite go to plan.

Projects where there are no time or patent concerns, solely resource restrictions (aside from cash), partnering with someone for development can be a fruitful route; especially when accessing development technologies not available internally.

If you have none of these concerns then the ‘hands-off' approach to product additions will provide a much quicker and simpler route to growth. Careful evaluation of documentation, approvals and commercial reputation will help ensure a greater proportion of successful deals.

There are a vast number of potential partners, with an equally vast number of products on offer. Choosing the right source and the right molecule can be tough, especially without an experienced licensing team to negotiate the abundance of information from developers.

To help you do more business, ICE Pharma Group have launched www.genericlicensing.com; the first searchable online database of products ready-to-license and in development. Supporting services are also offered to quickly and effectively in/out license products worldwide.


Asa Cox
asa.cox@genericlicensing.com
May 2009

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